Rosewood Corporation Rosewood Corporation produces a single product.The following cost structure applied to its first year of operations:

Variable costs:

SG&A $2 per unit

Production $4 per unit

Fixed costs (total cost incurred for the year):

SG&A $14,000

Production $20,000

Refer to Rosewood Corporation.Assume for this question only that Rosewood Corporation manufactured and sold 5,000 units in the current year.At this level of activity it had an income of $30,000 using variable costing.What was the sales price per unit?

Question

Rosewood Corporation Rosewood Corporation produces a single product.The following cost structure applied to its first year of operations:

Variable costs:
SG&A	$2 per unit
Production	$4 per unit
Fixed costs (total cost incurred for the year):
SG&A	$14,000
Production	$20,000

Refer to Rosewood Corporation.Assume for this question only that Rosewood Corporation manufactured and sold 5,000 units in the current year.At this level of activity it had an income of $30,000 using variable costing.What was the sales price per unit?

Quizplus · Accepted Answer

Using the formula for calculating Contribution Margin per Unit: Contribution Margin per Unit = Sales Price per Unit - Variable Cost per Unit
We can rearrange the formula to solve for Sales Price per Unit: Sales Price per Unit = Variable Cost per Unit + Contribution Margin per Unit
Using the information provided in the question, we can calculate the Variable Cost per Unit:
Variable Cost per Unit = $144,870 / 5,000 units = $28.97
Using the information provided in the question, we can also calculate the Contribution Margin per Unit:
Contribution Margin per Unit = Total Revenue - Total Variable Cost / Number of Units
$30,000 = Total Revenue - ($28.97 x 5,000)
Total Revenue = $30,000 + ($28.97 x 5,000)
Total Revenue = $184,850
Now we can substitute the values we calculated to solve for Sales Price per Unit:
Sales Price per Unit = $28.97 + ($184,850 / 5,000)
Sales Price per Unit = $18.80
Therefore, the answer is B) $18.80.

Rosewood Corporation Rosewood Corporation Produces a Single Product.The Following Cost Structure Applied